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Vicplas unit to invest in loss-making British medical device maker
VICPLAS International is taking a stake in a British medical device manufacturer through a subsidiary, under a subscription agreement made on Monday and announced the next day.
Forefront Medical Investment will pay £100,000 (S$179,600) in cash for new shares in Arrow Medical, for a 20 per cent stake, to be funded by internal resources.
It also has options to buy more shares and raise its interest to 60 per cent, for another £225,000 in all.
Arrow posted full-year pre-tax losses of S$130,551 and a negative book value of S$677,734, based on unaudited financial statements as at July 31, the board of Vicplas disclosed.
But the board said that the deal could expand Forefront's manufacturing footprint beyond China and Singapore, reducing the risks of global trade uncertainty and offering an alternative production facility that would not be affected by the tariffs that the United States has slapped on various Chinese products.
"The proposed investment, once completed, will add immediate production capacity to Forefront's current manufacturing footprint at a cost-effective entry price without the need to invest in, or wait for the development of, a greenfield facility," it added.
The board noted that the deal would give it a presence in Europe and expand its customer base beyond the US.
Forefront will also get short- to medium-term cross-selling opportunities, as well as access to complementary manufacturing capabilities, from the investment in Arrow.
The board also said that the price tag, reached on a willing buyer, willing seller basis, takes into account factors such as the historical performance of Arrow, as well as Forefront's assessment of possible future synergies from expected improvement in Arrow's production capability, capacity and service offerings.
Conditions precedent for the subscription include Forefront getting copies of undertakings from some lenders to Arrow over the suspension of repayment and waiver of interest on certain loans.
It also wants satisfactory financial statements for Arrow and a subsidiary for the year to Dec 31, 2017.